Fifth Utility: Invitation for an Expression of Interest (closing date: 30 October 2020)

1. INTRODUCTION

Mangaung Metropolitan Municipality is currently exploring the introduction of a Fifth Utility through a legal feasibility exercise.

Fifth Utility is a model for new services and revenue streams for the municipality in addition to the existing four main utilities of water, waste, sanitation and electricity. The Fifth Utility as currently explored by the Municipality includes services and trading in the areas of broadband and data services, logistics and warehousing, gas and green energy (including solar, wind and waste recycling energy).

The municipality is therefore called upon to come with new ways of service delivery and revenue generation through beneficial partnerships with the private sector and full use of its constitutional competency to achieve its service delivery objectives, establishing a smart digital city, developing its economy and creating jobs.

2. MODEL APPROACH

Due to its limited financial resources, the municipality is exploring the legal feasibility of entering partnerships with prospective private partners in the above Fifth Utility fields for purposes of provision services and revenue share.

Subject to Assets Transfer Regulations of 2008 and other regulations the Municipality will consider offering the use of its infrastructure and facilities such as land, buildings, telecommunications, water and electricity infrastructure and network, landfills and wastewater to the partnership. The private party may invest or request use of or in the infrastructure for amongst others the deployment of fibre, telecommunications network, gas reticulation, green energy plants and logistics distribution mechanism.

The partnership will result in the following for the municipality:

  • a. Enhanced and new services by the municipality
  • b. Additional Revenue through revenue share agreements
  • c. Economic recovery and growth for the City of Mangaung

The partnership will result in the following amongst others for the private party:

  • a. Opportunity to contribute to service delivery to residents of Mangaung
  • b. Access to Mangaung, provincial, national and international markets
  • c. Opportunity to contribute to the revenue of the municipality
  • d. Opportunity to contribute to the Mangaung Economic Recovery and Growth
  • e. Good business

3. OVERVIEW OF FIFTH UTILITY FIELDS

3.1 Logistics, Warehousing Hub and the Special Economic Zone

Various cities have taken advantage of their positioning as regional economic and tourism centres with regional passenger travel connecting and cargo logistics warehousing centres for onward conveyance and delivery to other parts of the world. Following the inspiration of these cities and countries, the municipality has established that it is strategically and most centered South African city between coastal ports of Mossel Bay, Saldanha Bay, East London, Durban, Cape Town and Nelson Mandela Bay, the inland airports of Maluti A Phofung Special Economic Zone, OR Tambo, Maseru, Kimberly, Upington and Mbombela.

The establishment of a Transport economic hub or Special Economic Zone will revive the Mangaung Economy and boost the City’s revenue. A transport logistics warehouse for goods destined to coastal and inland destinations will benefit the transport, tourism and manufacturers to establish value chain business.

3.2 Gas

The Municipality is empowered by the Schedule 4B of the Constitution of the Republic of South Africa to trade in and reticulate electricity and gas. Municipalities have traditionally traded and reticulated on electricity and abdicated opportunities presented by gas reticulation. The opportunities are both service delivery and added revenue base. Due to uncertainty of electricity supply caused by load shedding and by desire to cut electricity costs, private dwellings and other industrial customers are increasingly resorting to LP gas for home cooking, heating and industrial use.

Schedule 4B of the constitution provides the municipality with the power and competency to protect its revenue and at the same enhance it through gas reticulation and trading as an alternative revenue source. Trends indicate that most homes would have desire to cook and heat with LP gas. Private residential developments will have reticulation of gas for every household in estates. This presents not only service delivery imperative but revenue growth in the space that is constitutionally granted to municipalities.

3.3 Telecommunications Network and Digital Transactional Services

Digital Transactional and Network Services present a paradigm shift in how the needs of communities are viewed and delivered. The traditional way of community basic needs is that no member of the community can survive without electricity, water, sanitation and waste removal. In today’s age we can equally say no member of the community can survive without internet data.
Data is used for many reasons including communication, research and crime prevention amongst others. Children will be amongst the biggest users due to government school digitisation programme. The advent of COVID 19 has created a new normal that affirms the view that internet data is a basic need and commodity.

The community will have to use data to participate in future digital citizen engagement programmes including reporting of service delivery and by-law infringements incidents. Internet connectivity and data has become a basic community need. Free Wi-Fi hot spots, cheaper data and smart phones are a need for every household to participate meaningfully in the smart and digital society. Qualifying as a basic community need, internet connectivity and data have become basic service delivery needs.

Deployment of fibre and other broadband connectivity networks have become a need for the municipality to complement its data services.
The municipality should therefore partner with willing private partners with telecommunications licenses to roll out fibre, network connectivity to the city, marginalized communities especially townships and sell data, cheaper smart phones and telecommunications ancillary products on an agreed model of revenue share basis.

4. TRADING PARTNERSHIP MODEL

The Municipality is exploring the establishment of a services trading company that will enter into partnership agreements with private parties.

5. TRADING MODEL

Depending on the outcome of its legal feasibility exercise, municipality is exploring the possibilities of following options as trading model

  • a. Agency: The private party becomes an agent of the municipality. The private party manages the service delivery on behalf of the municipality. Section 78 of the Municipal Systems Act may be applicable.
  • b. Joint Venture: The Municipal Trading Entity and the private party conclude a joint venture and establish a trading vehicle or mechanism

6. EXPRESSION OF INTEREST

A private party must express an interest for the partnership with the municipality. The expression of interest should cover the following:

  • a. Choice of Fifth Utility area for investment
  • b. Proposed Investment
  • c. Partnership Trading Model
  • d. Revenue Share approach model
  • e. Proposed Local BBEEE structure
  • f. Economic recovery and growth plan in the chosen Fifth Utility field
  • g. Proposed period of Partnership

Subject to provisions of law, the submission of the expression of Interest may qualify a private partner to participate in a closed further Request for Proposal which may lead to a conclusion of a partnership agreement.

Closing date for submissions: 30 October 2020

Enquiries must be directed to Kagisho Masiu via email at David.Nkaiseng@mangaung.co.za or call 051 405 8623.

CITY MANAGER – ADV. TANKISO MEA